Apple's Australian arm charged with $28.5M in back taxes

The Australian Tax Office has hit Apple with a $28.5 million bill for back taxes, in what is viewed as a sign that the country may start cracking down on foreign tax havens.

Details on the $28.5 million bill are unknown, as it is illegal for the ATO to comment on individual cases. But the Brisbane Times reported on Friday that the ATO may be joining a tax push led by European governments targeting companies that shelter funds through intermediary companies in foreign countries.

Apple's Australian arm is owned by Apple Operations International, which is a subsidiary located in Cork, Ireland. Many companies have operations in Ireland to capitalize on the country's low corporate tax rate.

Last year, Apple earned $4.87 billion in revenue from Australia. Its total tax bill for its 2011 fiscal year was $94.7 million.

Apple's store in Sydney, Australia.

European governments have been looking to collect taxes from companies that rely on foreign tax havens. This week, the French government demanded $252 million in back taxes from Amazon, which relies on a tax haven in Luxembourg.

Apple sells devices to customers in Australia, but companies such as Google and eBay won't even admit to dealing with customers down under.

"Instead, according to its most recent report, Google Australia provides 'research and development services' to its U.S parent and 'sales and marketing services' to Google companies in Ireland and Singapore," the Brisbane Times reported. "For its part, eBay Australia and New Zealand's annual report discloses its principal activities as "the recommendation of market penetration strategies and advertising and promotion activities."

Apple also came under fire from regulators in Australia earlier this year, when the company was slapped with a $2.3 million fine for falsely advertising the 4G LTE capabilities of the third-generation iPad. The Australian Competition and Consumer Commission took issue with Apple's promotional materials which claimed the device offered 4G connectivity. But the ACCC felt the ads misled customers into thinking the device would work on Long-Term Evolution networks in Australia.

Ah, you mean the "loopholes" that are perfectly legal and of which only people capable of paying an expensive account can afford and entity in their right mind takes advantage. Got it.

Only entities with a large accounting department have the ability to take advantage of most of these tax loopholes. Starbucks can route its profits through a tax haven. Your local independent coffee shop cannot. It's not a level playing field.

I would imagine by removing the legality of the actions they undertook.

And once again we start a thread where someone pretends that there is an objective "fair amount" of tax.

Ah, you mean the "loopholes" that are perfectly legal and of which every single person and entity in their right mind takes advantage. Got it.

Do you really want 70% tax on everything?

Not 70%, but, doesnt' less than two percent seems a bit low to you? I pay about 30% in income tax.. and then, I pay 15% sales and service tax on everything I purchase. I wish I had made 4 billion dollars only to pay 2%

I dont believe in strangling companies. They need initiative to develop, grow, create employment. But I believe there is a civic duty for corporations.

If they purposely set themselves up so as to legally avoid taxes, how can these governments suddenly find a way to tax them?

There are often different ways to interpret legislation. A taxpayer will try to interpret to their favor, while the Govt will interpret in their favor. I don't know about Australia but court determined interpretations are not uncommon. Back taxes would then be paid or refunded based on the judgement. Unless there was fraud involved there shouldn't be any penalty. I was personally involved in one where we won to the tune of $13M. We are less than 5% the size of Apple so a $28M assessment is pretty small.

Originally Posted by ascii
But you can't retroactively change the law, surely?

Oh, no; but they can repeal whatever allowed Apple to do this and then go after Apple if they continue to use those methods.

Or maybe they can retroactively change the law. The UK did it.

Originally Posted by RichL
Only entities with a large accounting department have the ability to take advantage of most of these tax loopholes.

Funny how I as an individual am capable of taking advantage of tax loopholes every single year.

Starbucks can route its profits through a tax haven. Your local independent coffee shop cannot.

I question that, but we'll move on from it: But they can take advantage of tax loopholes.

Originally Posted by saarek
Fair as in level playing field. Company A who sells the same type of product at a similar turnover as Company B should not be hit with 25% tax vs 0.1% tax (numbers purely pulled out of the air).

The bigger you are, the more resources you have. That's sort of how it works. Should Lesotho have military bases in the US? No. First, they can't afford it, just as the independent coffee shop in the example above cannot necessarily afford an international tax haven. Second, they don't need it.

Lets face it, Apple is hardly a struggling little company that can't afford to pay tax.

"All money deemed 'extra' should be given to the state" doesn't seem to work very well.

See, Apple IS paying taxes. There's no such thing as not being able to afford to pay taxes. It's a contradiction in terms.